On Tuesday, during the Asian trading session, oil prices fell to a four-month low, continuing their previous decline. This came after OPEC+ stated that they would gradually reduce their production cuts starting this year, with weak economic data raising concerns about sluggish demand.
As of 21:03 (01:03 Beijing time), Brent crude futures for August delivery fell 0.4% to $78.05 per barrel, while West Texas Intermediate crude futures fell 0.4% to $73.80 per barrel. On Monday, both contracts fell by about 3.3%, reaching their lowest levels since early February.
OPEC+'s plan to gradually reduce production cuts is viewed as a bearish signal. At the weekend meeting, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) decided to maintain the daily production cut of 3.6 million barrels until the end of the year.
However, the organization will gradually reduce the daily production cut of 2.2 million barrels from the end of September 2024 until October 2025.
This phased reduction plan is seen as a bearish signal for the market, especially if demand fails to materialize as OPEC+ anticipates over the next year. It also indicates limited room for the organization to continue supporting oil prices.
“The market expected the production cuts to last until the end of the year. As investors weighed the increase in supply against the uncertain economic outlook, Brent crude prices fell,” analysts from ANZ Bank wrote in a report.
Weak PMI data and mixed signals from China raise demand concerns. The weak U.S. Purchasing Managers' Index (PMI) data also unsettled the crude oil market, showing that U.S. manufacturing activity contracted for the second consecutive month in May.
